Navigant Research Blog

Tesla Breaks into Japan

Scott Shepard — September 25, 2014

Last week Tesla opened its Japan sales operation with Elon Musk handing over nine keys to the first Model S owners in the country. The event is significant because foreign automakers, especially U.S. ones, sell very few vehicles in Japan. Although the country’s vehicle market officially opened to limited foreign participation in the 1970s, despite extensive automotive trade negotiations between the United States and Japan, the country has effectively remained closed. Nearly 96% of all vehicle sales in the country come from Japanese companies, while the remaining 4% come from German automakers, with a barely visible blip of around 1,000 vehicles coming from GM. This has been frustrating for foreign automakers – but it’s also hindering Japan’s plug-in electric vehicle (PEV) market.

As of 2013, Japan is the third-largest vehicle market and the second-largest PEV market in the world. PEV sales were initially strong, thanks to infrastructure developments and vehicle deployments by Nissan, Mitsubishi, and, to a lesser extent, Toyota. However, Toyota and Honda have since scrapped most of their PEV development programs, and no new PEVs were introduced in 2014, until Tesla did so last week. To provide some context, there have been 24 different PEV models sold in Norway in 2014, while only 7 (including Tesla and three variations of the Mitsubishi i-MiEV) have sold in Japan.

Flat through ‘14

As a result, despite significant growth in every other PEV market, PEV sales in Japan will likely remain flat in 2014, at around 30,000 units. This means that the country’s market will fall to third behind China; it may also lose ground to Germany, France, Norway, and the Netherlands, winding up in seventh in 2014. Given Japan’s significant foreign energy dependence issues (Japan essentially imports 100% of its oil), this is a problem.

PEVs have substantial energy efficiency improvements over conventional vehicle platforms that, if adopted en masse, could do a lot to reduce Japan’s dependency issues. Additionally, the country’s subsidy program, large vehicle market, significant price differential between electricity and gasoline on a per mile basis, and well-developed public charging infrastructure present the optimum conditions for the PEV market. Unfortunately, Japan’s traditionally isolationist national automotive policy is inhibiting its own national energy security and greenhouse gas (GHG) reduction goals.